Auto No-Fault Update


On Monday, our office learned that we’d be called into the Senate Committee on Insurance and Banking the next morning at 8:30 a.m. We were told we’d be reviewing and voting on Senate Bill 1 — a bill to create sweeping changes to Michigan’s auto no-fault insurance system.

The problem is: we hadn’t seen the bill yet, and we didn’t until late in the evening.

The 79-page bill proposed nothing less than a complete overhaul of Michigan’s no-fault auto insurance system, eliminating the Michigan Catastrophic Claims Association (MCCA), creating a tiered Personal Injury Plan (PIP) choice system with coverage dropping from unlimited lifetime support to $250K at the high end and $50K at the low end, and the option to opt-out of coverage for drivers who instead wished to rely solely on their health insurance. All of these changes came with no mandate or guarantee of rate reduction to drivers. 

Rushing a bill like this rarely occurs in the legislature, especially on a piece of legislation that could drastically impact the lives of thousands of Michigan drivers without careful thought and extensive discussion.

After staying up late reading through SB 1, I was left with a lot of questions that didn’t get answered in this rushed process. I was deeply disappointed in the highly-partisan nature of the proceedings in what should have been a robust, thoughtful and nuanced dialogue to work together toward real solutions.

Most importantly, I am disheartened that the Senate passed legislation that does not guarantee rate reductions and guts coverage.

Conversation in Committee

I came to committee prepared to ask a number of questions that matter to Michigan drivers. For example:

If coverage is cut on the auto insurance side, what treatment options will be lost and how will those costs affect your health insurance premiums?

Has there been a cost-benefit analysis done by a non-partisan agency to understand the cost shifts for consumers and what this program will cost to administer?

Where in this bill does it ensure that people in catastrophic accidents receive the care they need without having to go bankrupt paying for medical treatment? 

Who determines whether or not a treatment is considered “medically necessary” and what are the consumer protections in place if they’re denied coverage?

Unfortunately, we were limited to one question per person. Here is a list of 26 questions I compiled for committee during my late-night review of the bill. 

What’s the deal with Senate Bill 1? 

Senate Bill 1 would eliminate Michigan’s no-fault insurance system by instead requiring drivers to choose whether to opt-out of coverage through a PIP.

Essentially, this means drivers in Michigan will no longer have the option of unlimited medical coverage after an accident through the Michigan Catastrophic Claims Association (MCCA), but force drivers to choose between capped PIP medical coverage plans of $50,000, $200,000 or $250,000 or opt out of medical coverage entirely.

The bill also would implement a fee schedule on medical providers in line with workers’ comp rates, modify the statute of limitations to filing an action against a third party and create an Automobile Insurance Fraud Task Force within the Michigan State Police.

Why I’m opposed to the plans proposed in Senate Bill 1

While this bill claims to lower high insurance rates by allowing consumers to choose their degree of coverage, there is no mechanism that guarantees lowered rates. Instead, it shifts the costs for drivers, drastically cuts coverage, perpetuates the use of redlining and use of non-driving factors in the setting of individual rates. It also does not require insurers to justify their rates prior to authorization.

For these reasons, I voted in opposition to SB 1 when it came to the floor for a vote yesterday, urging my colleagues to do the same until we work in a more collaborative way to solving this issue. 

Worst case scenario: without proper consumer protections, the legislature makes sweeping changes to our no-fault system that results in you paying the same rate or more for significantly less coverage. That is why I spoke in opposition to the bill on the Senate floor yesterday.

What I’d like to see in a real solution:

At this point in the process, the House will have the opportunity to take up this bill and offer amendments. My hope is that numerous changes are made before it comes back to us in the Senate.

A few of these solutions include:

  1. Switching from a file and use to prior approval system: some of the states with the lowest auto rates have switched to a prior approval system and have seen lowered, more stable rates for consumers. This would require all insurance companies receive prior approval from the state on any rate changes before putting them into use. Currently, Michigan does not require prior approval.​

  2. Prohibit the use of non-driving factors in rate setting: this should not be a partisan issue. We should not allow insurance companies to use gender, race, zip code, marital status or credit history when setting rates.

  3. Create an elected auto insurance oversight position within DIFS: we should create the oversight and consumer protection that the current bill is lacking.

  4. Mandate that drivers with the best driving records receive the lowest rates.

What happens now?

SB 1 now heads to the House of Representatives, where it will likely be referred to the House Committee on Insurance for further review.

Once voted out of the House Insurance Committee, it will go to the floor for a vote and be brought back to the Senate with any changes made. My hope is that the House will work in a more bipartisan fashion to include some of the changes mentioned above.

To contact your state representative about this bill, visit the Michigan House of Representatives website and find your representative.

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